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Under the previous provisions of title I prior to the June 1939 amendment three was no charge to the lending institution for the benefits accruing to it under 18 contract of insurance and all costs of operation of the Federal Housing Adm.tration including the reimbursement of loss on defaulted notes, were borne by the Federal Government. In the amendments of June 3, 1939, provision was meile for an insurance premium charge not to exceed three-quarters of 1 percent per annum, payable in advance, of the net proceeds of each loan reported for insurazice under title I, as amended, effective July 1, 1939. The same premium charge is provided in the amendment of June 28, 1941.

The insurance charge on all repair and modernization loans (class 1) and per nonresidential structure loans (class 2) is three quarters of 1 percent per annun, payable in advance, and on all new residential structure loans (class 3) it is : half of 1 percent per annum, payable in advance or in annual installments at the option of the lending institution.

The principal changes relating to title I under the amendment of June 28, 1941, are (1) the extension of the insurance provisions of title I to June 30, 1943, (2) increase in amount of loans under (a) class 1 from $2,500 to $5,000, (b) classes 2 and 3 from $2,500 to $3,000, and (3) increase in term of loan under class I loa over $2,500 from 3 years and 32 days to 5 years and 32 days.

It is estimated that during the current fiscal year revenue from fees and premiums will be $2,665,750 and $2,703,800 during the fiscal year 1943. This based upon the insurance of loans amounting to $192,232,500 and $195,937,000 in the fiscal years 1942 and 1943, respectively. This is about $ 105,000,000 l than the fiscal year 1941 when the volume of insured loans amounted to $297,203,492. The reduction in the estimate of the volume of business for the fiscal years 1942 and 1943 is due primarily to the shortage of critical materias for which priority ratings must be obtained, and the effect of the regulations of the Federal Reserve Board, placing certain restrictions on consumer credit.

Claim for reimbursement of loans on a qualified note may be made after parment on such note becomes in default and written demand has been made upnin the borrower for payment in full of the delinquent obligation. The lending itsutution assigns to the United States the note on which the loss was incurritos gether with any security taken to secure payment thereof. The Federal Hong Administration, after payment of the claim, undertakes to effect collection fr 1 the borrower. As of June 30, 1941, there had been paid out in claims $34,393.24 (ash recoveries amounted to $7,704,097, all of which has been deposited in the Treasury to the credit of miscellaneous receipts. Property having an estimate 1 value of $4,093,100 had been repossessed, the bulk of which has been turned on to the Procurement Division, Treasury Department, for disposition. I'nder !! provisions of the June 1941 amendment all monies recovered on notes insim!

under the June 1939 amendment are deposited in the Treasury to the credit auf · the title I fund. It is estimated that about $2,600,000 in cash will be recover during the current fiscal year, of which about $1,550,000 will be deposited to: credit of miscellaneous receipts and $1,050,000 to the credit of the title I furt During the fiscal year 1943 it is estimated about $3,000,000 in cash will be reout. ered, of which about $950,000 will be deposited to the credit of miscellane.-28 receipts and $2,050,000 to the credit of the title I fund.

A summary of title I transactions through June 30, 1941, and a statement of recovery and expense in collections of defaulted title I notes follows:

Summary of title I transactions, cumulative through June S0, 1941

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Summary of title I transactions, cumulative through June 30, 1941Continued

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Recovery and expense in collections of defaulted Title I notes

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1 Total recovery includes cash collections on notes and repossessed equipment and property credits, excepting unrecovered balances on sales and property destroyed by Treasury.

1 Reduction in percentage of total expense to total recovery in June was caused by the entry of $156,442.23 of real property not previously recorded.

Title II, section 203, insurance of mortgages on individual loans.—This section of the act sets up a single, self-supporting, mutual mortgage insurance plan under which approved lending institutions are insured against loss of the unpaid principal of moneys loaned on mortgages, together with such amounts as they may advance for taxes and other specified items. To be eligible for insurance under this section the mortgage must conform to certain rules as follows:

1. It must be held by a mortgagee approved by the Administrator as responsible and able to service the mortgage properly.

2. Mortgages must not exceed $16,000 and must not exceed 80 percent of the Administrator's appraised value of the property, except that mortgages not in Under the previous provisions of title I prior to the June 1939 amendment three was no charge to the lending institution for the benefits accruing to it under its contract of insurance and all costs of operation of the Federal Housing Adminis tration including the reimbursement of loss on defaulted notes, were borne by the Federal Government. In the amendments of June 3, 1939, provision was made for an insurance premium charge not to exceed three-quarters of 1 percent per annum, payable in advance, of the net proceeds of each loan reported for insurance under title I, as amended, effective July 1, 1939. The same premium charge is provided in the amendment of June 28, 1941.

The insurance charge on all repair and modernization loans (class 1) and net nonresidential structure loans (class 2) is three quarters of 1 percent per annum, payable in advance, and on all new residential structure loans (class 3) it is orathalf of 1 percent per annum, payable in advance or in annual installments at the option of the lending institution.

The principal changes relating to title I under the amendment of June 28, 1941, are (1) the extension of the insurance provisions of title I to June 30, 1943, (2) increase in amount of loans under (a) class 1 from $2,500 to $5,000, (b) classes 2 and 3 from $2,500 to $3,000, and (3) increase in term of loan under class I loats over $2,500 from 3 years and 32 days to 5 years and 32 days.

It is estimated that during the current fiscal year revenue from fees and pre miums will be $2,665,750 and $2,703,800 during the fiscal year 1943. This based upon the insurance of loans amounting to $192,232,500 and $195,937,30 in the fiscal years 1942 and 1943, respectively. This is about $105,000,000 bp than the fiscal year 1941 when the volume of insured loans amounted to $297,203,492. The reduction in the estimate of the volume of business for te fiscal years 1942 and 1943 is due primarily to the shortage of critical materiat for which priority ratings must be obtained, and the effect of the regulations in the Federal Reserve Board, placing certain restrictions on consumer credit.

("laim for reimbursement of loans on a qualified note may be made after pussment on such note becomes in default and written demand has been made up a the borrower for payment in full of the delinquent obligation. The lending inte tution assigns to the United States the note on which the loss was incurred to gether with any security taken to secure payment thereof. The Federal Hous". Administration, after payment of the claim, undertakes to effect collection is in the borrower. As of June 30, 1941, there had been paid out in claims $34,393.2 ('ash recoveries amounted to $7,704,097, all of which has been deposited in the Treasury to the credit of miscellaneous receipts. Property having an estima value of $4,093,100 had been repossessed, the bulk of which has been turned are: to the Procurement Division, Treasury Department, for disposition. I'nder part provisions of the June 1941 amendment all monies recovered on notes and under the June 1939 amendment are deposited in the Treasury to the credit of the title I fund. It is estimated that about $2,600,000 in cash will be recuvent during the current fiscal year, of which about $1,550,000 will be deposited to this credit of miscellaneous receipts and $1,050,000 to the credit of the title I fu* 1 During the fiscal year 1943 it is estimated about $3,000,000 in cash will be mis. ered, of which about $950,000 will be deposited to the credit of miscellane : 23 receipts and $2,050,000 to the credit of the title I fund.

A summary of title I transactions through June 30, 1941, and a statement of recovery and expense in collections of defaulted title I notes follows:

Summary of title I transactions, cumulative through June 30, 1941

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Total notes insured:

1, 461, 527
067, 700

314,967, 122 8 1, 173, 04

46. 344,008. 191 3.303, 1011370, 375, 87% 6

Prior to Feb 3, 1938, amendment. l'nder Feb 3, 122, amendment. l'nder June 3, 12, amendment.

Total. ...
Claims puid.

Insured prior to Feb. 2, 1938, amendment
Insured under Feb. 2, 1838, amendment...
Insured under June 3, 1998, amendmeut.

Total.....
Difference...

101, 037
21, 411 8,044, 78 16
18, 133 4,807, 874. 10
136, 1 35,077.377.28
3, 160, 610 | 1,84,801

Summary of title I transactions, cumulative through June 30, 1941-Continued

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Recovery and expense in collections of defaulted Title I notes

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1 Total recovery includes cash collections on notes and repossessed equipment and property credits, excepting unrecovered balances on sales and property destroyed by Treasury.

Reduction in percentage of total expense to total recovery in June was caused by the entry of $156,442.23 of real property not previously recorded.

Title I1, section 203, insurance of mortgages on individual loans.—This section of the act sets up a single, self-supporting, mutual mortgage insurance plan under which approved lending institutions are insured against loss of the unpaid principal of moneys loaned on mortgages, together with such amounts as they may advance for taxes and other specified items. To be eligible for insurance under this section the mortgage must conform to certain rules as follows:

1. It must be held by a mortgagee approved by the Administrator as responsible and able to service the mortgage properly.

2. Mortgages must not exceed $16,000 and must not exceed 80 percent of the Administrator's appraised value of the property, except that mortgages not in excess of $5,400 may be insured up to 90 percent of the appraised value of the property, if the mortgage is approved for insurance prior to construction, covers a single family residence, is made by the owner who occupies the property as a home and the mortgagor has invested in the property at least 10 percent of its appraised value in cash or its equivalent.

3. The mortgage must have a maturity satisfactory to the Administrator, but not in excess of 20 years for the 80 percent mortgages and 25 years for the 90 percent mortgages.

4. The mortgage must contain complete amortization provisions requiring periodic payments by the mortgagor not in excess of his reasonable ability to pay.

5. Under the National Housing Act the mortgage must bear interest at not to exceed 5 percent except that the Administrator is given the right to raise this interest to 6 percent if he finds in certain areas the market demands it. (It should be pointed out that while the act provides a maximum of 5 percent interest on loans insurable under this section that effective August 1, 1939, the Administrator provided by regulation that the maximum interest to be charged was 442 percent.)

6. The mortgage shall provide in a manner satisfactory to the Administrator for the application of the mortgagor's periodic payments. Under the regulations the mortgagor makes his payments on account of interest, amortization, taxes and mortgage and hazard insurance premiums, monthly and in one payment and for 20 or 25 years he has no other payments to make.

The amendment of June 28, 1941, to the National Housing Act extended the provisions of Section 203 relating to the insurance of mortgages on existing construction, from July 1, 1941, to June 30, 1944.

All individual home mortgages accepted for insurance are classified into groups in accordance with sound actuarial practice and risk characteristics. These group accounts are carried as charges or credits in the mutual mortgage insurance fund and as a result of the grouping mortgagors with low-risk mortgages retain the advantage arising from such fact when the respective groups are terminated.

All premium charges and other income from mortgages in a particular group and all properties conveyed to the Administrator in connection with a mortgage in a particular group are credited to that group. The principal and interest on all debentures and all expenses incurred in the handling of properties are charged to the group to which the mortgage is assigned.

The Administrator is directed to terminate the insurance as to any of these groups when he shall determine that all the outstanding mortgages in the group have been paid or that the credit in the group is sufficient to pay off the unpaid principal of all the mortgages in such group. When a group is terminated an amount equal to 10 percent of the premiums is transferred to a general reinsurance account which is set up as a part of the mutual mortgage insurance fund and the balance is equitably distributed to the mortgagors in the group.

This general reinsurance account operates as a reserve behind the assets in the group accounts and is available to cover charges against those accounts where the amounts credited to them are insufficient to cover such charges. In other words, losses in connection with any mortgage shall first be charged to the group to which the mortgage is assigned and if the assets in that group become insufficient, then the general reinsurance account is used. If the reinsurance account is insufficient then, and only then, the guaranty of the Government becomes effective. The $10,000,000 originally allocated by Congress to the fund has been credited to the general reinsurance account.

The general expenses of the Administration, under section 205 (b), title II, with respect to individual home mortgages may be allocated in the discretion of the Administrator among the sever l group accounts or charged to the general reinsurance account as he shall determine.

As of June 30, 1941, the net worth of the mutual mortgage insurance fund was $34,350,549, an increase of $6,618,949 over the net worth as of June 30, 1940. This amount remains in the fund after transfer of $33,393,320 for administrative expenses authorized under appropriation acts, and of $1,000,000 to the housing insurance fund authorized in the June 1939 amendment to the National Housing Act. The income from fees, premiums, and interest on investments under section 203 for 1942 is estimated at $22,253,347 and at $24,311,000 for 1943.

As of June 30, 1941, there had been insured 726,329 loans amounting to $3,108,493,539 under section 203. There had been acquired, 2,895 properties of which 2,283 had been sold leaving 612 on hand. The total loss to the fund from these operations amounts to $1,418,104 or about 0.000456 percent of the total insured. The following statements give a summary of operations under the mutual mortgage insurance program and the status of the fund.

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